scarlet: we are moments away from the fed minutes from the december meeting, when they raise rates for the third time in 2017. we check in with chris condon at the federal reserve. minutes today showing a couple of things. first of all, the committee is making no progress on better understanding the inflation mystery that confronted it in 2017. second of all, it is a very divided committee about the risks it is facing going into 2018. first of all, a bit about the dovish group. i get the sense from these minutes that the number of committee members that are growing concerned about inflation and inflation expectations is growing slightly. here is an interesting excerpt from the minutes themselves -- "several expressed concern that persistently weak inflation might have led to a decline in longer-term inflation

xpectations." still, a majority of the committee were clearly in favor of the rate hike that the fed went ahead within december, and the majority of the committee are still expressing some confidence that inflation in the medium-term is going to move back to 2%. but there is a sense that confidence in that is slipping a bit. that matches up with the fed's forecast, the dots that we saw last month. the median for rate hike projections asked year is three, but their worst -- next year is three, but there were six committee members below that meeting. ledave a more hawkish group by people like loretta mester in cleveland, and they are more concerned about a severe undershoot of unemployment in 2018, possibly leading to a bump in inflation. and here is another interesting quote i found in the minutes. "participants discussed several

couldthat, if realized, result in a steeper path of increases in the target rate." they mentioned those risks include the economy expanding well beyond its maximum sustainable levels, perhaps orng to fiscal stimulus accommodative financial market conditions. is very divided on where they think inflation is going in 2018. is the keyvided word. chris condon at the federal reserve, thank you so much for that recap of the federal reserve's minutes. julia: let's get more insight on the and what it could mean for the economy. joining us is scott brown. great to have you with us. we have downside and potential upside risks there. the downside is that concern about inflation and the influence on inflation expectations.

the top side, a potential overheating. what are your thoughts? oftt: i think you are kind in this middle ground where there is a lot more uncertainty heading into the new year. we have a change in leadership, and that should be a relatively smooth transition, at least in the first half of 2018. we do not expect any changes to the balance sheet, for example. but things get more uncertain if you look the on the middle of next year. we know we will have some new faces at the fed, and once yellen leaves there will be three slots open on the board of governors. the two dissenting votes in december, the two doves will rotate off of the committee. on thewe think is more dovish side. so all in all, it will be a more hawkish tilt as we go forward in 2018. you mentioned the fiscal stimulus.

it is uncertain how much stimulus we will see on the economy in 2018, but the hawks to going to be wanting prepare for that and raise rates sooner than later. how the markets adjust to this and what happens to long-term rates, these are really a clouded part of the outlook. it certainly is. what did you make on their lack of progress when it comes to determining why inflation remains so stubbornly low? unable to get to the 2% target? been somere have clear factors in the past few years, slack in the labor market, a strong dollar, low commodity prices -- all of those things are now behind us, so you would have expected inflation to really pick up a bit more in 2017, and it did not. if you heard yellen speak about all of thesed temporary factors are certainly behind us, but we do not know -- maybe something is fundamentally changed. if we get a more hawkish fed

going forward, the markets will expect that 2% goal has more of a ceiling. the market expectations of inflation will be even lower than that 2% goal, and that could be a problem for the fed going forward. scarlet: what about the consumer? i ask about them because of the auto sales numbers we got today. they were weaker than many had expected for the year, perhaps a little bit disappointing. we had a good run for auto sales for a while, but is there anything we can read into the broader economy, when you look at the latest auto sales? been aauto sales have pretty significant source of strength during the economic recovery. it has been steady improvement since the financial crisis, and that was driven by two factors. one, people need to get new cars, there is a replacement need there, and the other is that bank reddit has been relatively easy, it is easy to get an auto loan. -- credit has been relatively

easy, it is easy to get an auto loan. for the first eight months of the year, that is where the majority of the weakness was concentrated. in the past four months, partially related to the hurricanes -- you had to buy new cars because your car was damaged in the hurricane -- also, inventory clearance. but the pace as you look forward is probably more sustainable. i think we cannot count on motor vehicle sales adding that much to gdp growth in comparison to recent years. with that said, it is still promising for the automakers, because the job market will still be strong. there is a shift toward the more profitable suvs and trucks for these car companies. so the outlook for the automakers i think is pretty good. scarlet: our thanks to scott brown, joining us from saint peter berg -- st. petersburg, florida. julia: [indiscernible]

the europe markets closing in two hours time. where stocks are trading right now with julie hyman. julie? julie: all three major averages did touch records earlier in the day, and my producer just telling me that the s&p 500 has not had back-to-back years in which the first two trading days were positive since 1987. take from that what you will. it is an interesting stat here. here is the s&p 500 on the day, looking for reaction to the fed minutes. we are not seeing much. we saw stock speak around 1:00 p.m. and coming off, still higher by about .5% on the day. technology and energy shares were leading games. -- gains. let's check on the u.s. dollar in the wake of the fed minutes. it actually took a bit of a leg the wake of the fed minutes, although we learned the majority of federal open market committee members still supported an increase in rates

in december, which we got. quarter ofnow up one 1%, and rising for the first day in five. as for rates, let's check on those. the 10 year yield, we have been watching that come off the lows but not looking at much of a reaction. it is directionally the same as the dollar, but magnitude wise, not much movement at all in the 10 year. ended commodities, we have been seeing quite a busy session, particularly for oil prices, which have been rising both on the continued unrest in iran and the inventory data here in the u.s., which is expected to show the seventh weekly drop in inventories. ,old is also a little bit lower along with copper today. scarlet? scarlet: speaking of unrest in iran, breaking news. a turkish anger was -- banker of convicted of helping iran aid u.s. financial sanctions and launder about $1 billion through turkish banks. he has spent almost a year in

federal lockup in new york. just a quick note, the dollar is stronger versus the turkish lira following the release of these headlines. senate ising up, the facing the big sticking points on a spending bill. -- willcrats knowledge the democrats nudge for a deal on immigration? more on that when we get back.

♪ julia: this is bloomberg markets. i'm julia chatterley. scarlet: i'm scarlet fu. president trump breaking away from steve bannon. he said his former top strategist has had very little victory,h his election

and said the former top aide has "lost his mind." saw this when we first statement, we do not know why he chose to make these comments. give us the backstory here? margarget: there is a new book coming out, and it is going to be explosive. some excerpts have come out today, and steve bannon's interview for the book is among them. that is the news peg for this. the president began the new year yesterday with a flood of critical tweets on everything from whether houma aberdeen should be incarcerated in some fashion to going after the north korean leader, and there was a lot of discussion about whether he was trying to send a signal or what this was about, and then we got a preview of this book with some of these comments. they are certainly explosive and it is a former splitting -- formal splitting of a relationship that was strained since then and was forced out of the white house several months

ago, but had still existed. this seems like a turning point today. julia: what do you mean by turning point here is? in terms make --resident, can we turningyou mean hereby point? in terms of steve bannon and the president, can we make any assumptions on things changing the way they have in the past? the president has a material style and can change his pursuit as he wants at any time, but what has been often true in general is that people come in and out of his business organization or his still-young white house, but they never really disappear. he remains in touch with and often consult with people who have left his inner circle officially. when steve bannon left the white house, he had said publicly and the president and some of his team had intimated that he could even perhaps be more helpful on

the outside, because he could be unleashed and would not have to act like a white house adviser. he could be this i strategic, guttural base advisor that had brought him to the enterprise to begin with. but several things happened over the summer -- not just his ouster from the white house, but the alabama special election and then impose the efforts to blow up the establishment structure inside congresses congressional leadership -- inside congress' congressional leadership. margaret, thank you for that. let's get more on this showdown between president trump and steve bannon, as well as everything else -- the more important stuff on the d.c. agenda. congressman, great to have you on the show. i want to get a quick comment on you from this statement of the views on provided, his

his relationship currently with steve bannon. how should we interpret this? how are you interpreting this? >> we know the difference between a tweet and an official statement, but i do not focus on palace intrigue. i am focused on those more important issues. we should be focusing on the wing that there is a satha in the relationship between north and south korea, there is a protest in iran that we have not seen since 2009, and we also have to solve a problem for one million kids in the united states of america, who have only known this country as their home. those are some of the things i have been trying to deal with. let's talk about this. we have to prevent a government shutdown before january 19. the democrats are pushing for a solution for the dreamers, the undocumented immigrants. the president seemingly tying this to funding for a border wall. i know your views on the mexican wall, but is there a bipartisan

solution here that is possible, and how can it be achieved? i know you have been working on this. rep. hurd: i think there is a bipartisan solution possible, and it think it requires readable people to build trust -- reasonable people to build trust. i think most people want to see reasonable border security. it is 2018, and we do not have operational control of our border and we should. building a wall some see is not the way to do that, but smart border security is possible. and how do we solve the problem for these one million kids? the good thing is nobody is talking about deporting the dreamers. if we did that, that would have a quarter of a trillion dollars in theon our economy next 10 years. you are talking about taking 700,000 people out of the population of workers, and they are contributing into social security. so that would have an economic impact on our country.

these are a group of people that have already provided -- they have influenced our culture, history, and our economy. let's solve this sooner than later. mentioned the situation in north korea. there has been a lot of focus on the president tweet -- president's tweet in regards to the bigger button. i was wondering whether or not you can credit the president with this augustine from the south koreans that they are now engaged in talks with the north? rep. hurd: we also forget that the u.s. is in talks with north korea. secretary tillerson mentioned that a year ago. he will thought that would have been unheard of. the fact that the north koreans picked up their special phone and had a call yesterday -- that is the first time in two years that has happened, and it seems to be an agreement for the north koreans to participate in the olympics in south korea. as long as people are talking, you are not shooting. does this lead to

a detente? i hope so. i think we consult this problem diplomatically without getting into a shooting war. julia: do you think that is the result of the president's stance, or is this despite him, in a sense, that he is pushing the north koreans closer to the south koreans here? rep. hurd: as we have talked efore, i spent 9.5 years undercover in the cia. one thing i learned there was to be nice with nice guys and tough with tough guys. has it been the fact that we have been engaging with the chinese on tightening sanctions korea? the fact that we are calling out people for breaking sanctions -- i do not think you can focus on just one element, but there are a lot of efforts going on in order to bring north korea to the negotiating table and not have

them pursue weapons of mass destruction. julia: congressman, that is a great point to make. i want to go back to what you said at the beginning, when i asked you about a statement versus a tweet from the president. you said we have learned the difference between a statement and a tweet -- what have we learned? rep. hurd: look, when it comes to iran protests, this is a big deal. somee been frustrated that folks around the world are amplifying the message of the iranian government, not the iranian people. will prevent the iranians from having a nuclear weapon and using it against our allies like israel, saudi arabia, and jordan is a change of government, and the only people who can change the government are the people. we should be doing everything we can to amplify their message, and i wish more of our friends across the atlantic in germany, france, and the u.k. would follow the president's lead and talk about the support of the iranian people.

julia: i understand what you are saying, but doesn't that also of theo the hands hard-liners in a ron, who say these are being affected by external forces? rep. hurd: they will say that no matter what the president says. iranianence is not the government, it is the american -- iranian people. they will say of course that these are external forces causing this to happen. that is the classic playbook. they do that in 2009, they have done that in the history since the constitutional revolution in 1906 in a run. they are expected to do that, but -- iran. they are expected to do that, but that does not change the fact that we are supporting the iranian people and they have friends. when you have a government trying to stop the way they communicate, and if we can promote and broadcast things into a ron that they cannot -- iran that they cannot themselves, that is a success. julia: representative hurd,

thank you. plenty more from bloomberg markets after this. from bloomberg markets after this.

♪ scarlet: etf that the big time in 2017. here's a recap on the winners and losers -- looking , you had a numbers lot of value etf's doing really well, taking in a lot of money, even though growth was really the story. >> value was very popular. it is the second biggest category of smart data after dividends, and the vanguard value really led the way. it is not necessarily people trying to tie the time that it will work, but it is cheap. six basis points for value -- vt managers worst nightmare. it is the perfect advisor

product to replace a high cost active manager. a performance story. that was up 38%, and that is continuing. that is largely on tack. scarlet: so little bit of both. and in terms of -- energy tops the list. this is for the european hedges etf. the outflows from this are because of dividend weight that it is technically smart data, but that is why the outflows count on this list. are used two tickers in a monster sector rotation etf called fb. when it decides to go in and out of the sector, it uses other etf's. so those are from another mother ship etf. there was rotation out of those areas. scarlet: and speaking of winners and losers, let's show you one etf that returned a healthy 18% last year.

>> the start of a new year means resolutions, mainly, getting in shape. enter bfit, the global health and wellness somatic etf. it tracks companies promoting a healthy lifestyle, like lululemon and nike. half of its holdings are mid and small caps, while two thirds are international. it costs 50 basis points and has attracted only $2.5 million, but is the sole surviving etf profiting from global spending on fitness. onlyet: it is the surviving fitness etf, but there was another one that hung in there for a while. >> janice came out with fits, which was sort of the same product. etfs were two auto back in the day. $25close, one has million. but this one has been

performance length and it has not been there. we will see a lot of people get in shape for the etf to take off. scarlet: the idea is good but the numbers need to go. be sure to catch us every wednesday from bloomberg etf iq, the first show solely focused on etf's. that's at 12:30 new york time every wednesday. ahead, the u.s. is having a big impact on commodities. how it is impacting everything from oil to oranges, next. this is bloomberg.

♪ scarlet: from a frigid blue

bloomberg headquarters in midtown manhattan, i'm scarlet fu. the wti is gaining today to its highest level since june 2015. weekly u.s. inventories come out tomorrow, and that report will confirm the longest decline in crude stockpiles since the summer driving season. the frigid weather i was referring to is also impacting oil. producers in west texas have been training their output as some wealth freeze up -- wells freeze up. orange juice is gaining today, icy conditions are in florida and the profits are at risk of freezing up. its note in tallahassee for the first time in 28 years. in tallahassee for the first time in 28 years. is slipping today, off by one point 5%. while it is cold, there is hope on the horizon. so whether models are forcasting a thaw

mid-january, but we have to get there first. scarlet.anks, joining us more on how the weather is impacting the commodities market and what we ourld expect is meteorologist with bloomberg new energy finance. talk to me about the path of the storm we are expecting? snow coverage, frigid temperatures, and what precisely [indiscernible] this is a classic nor'easter, but it is extremely powerful. we have a lot of energy in the atmosphere, extremely cold air, as we all know right now, and the oceans are still pretty warm. that creates a perfect mix of energy for this storm to really intensify. -- bomle genesis bogenesis is just that. pressure dips more than

24 millibars in 24 hours, that is what happens. scarlet: that sounds like it could be a frightening prospect. is it in practice? >> it means the potential for high wind, the potential for blizzard conditions, and heavy snow. the track the system is taking is veering just offshore, not to the point where we are only can he get about -- going to get in new-6 inches of snow england, but the real story is the cold air that is going to be following the storm and also the wind. we will be expecting 40-50 mile-per-hour wind, certainly across much of the north and new england. julia: and that makes the windchill higher as well. scarlet: is this like a nor'easter as a result? >> it very much is a nor'easter. energy demand,ut because we have been talking about the spike in demand for

natural gas and new england importing some to offset the extra demand as well? >> that is exactly right. to england is importing satisfy the natural gas demand. that will be going toward heating homes and businesses, and also generating power. the power markets have to rely on other sources, like whole and and oilsatisfy -- coal to satisfy demand. we are seeing more than double the natural gas usage from last year, and even more than what we saw in the 2014 polar vortex. that is in part to gasket are getting to power generation. scarlet: and we will see that jump in numbers as well, the not gas storage the -- nat gas storage numbers come out tomorrow. what does that say about the supply we have going forward? mybloomberg financed analysis, looking at this every

single day. we are expecting over 200 bcf. so wes lack one week, have a lot of cold weather last week, so we are expecting some withdrawal tomorrow. next week, essentially over 300 billion cubic feet, which is quite high. it to the comparing polar vortex we saw in 2014 -- quite remarkable. it is great to have you with us. scarlet: you will be pretty busy for the next couple of days. >> i will. julia: let's get a check on the headlines and the first word news with mark crumpton. mark: president trump is firing back against his former trees strategist- chief steve bannon, after bannon called donald trump, jr. "treasonous" for holding a meeting with russians during the campaign. trump said donald "steve bannon has nothing to do

with me or my presidency. when he was fired he not only lost his job, he lost his mind." were on thetors senate floor as they took their oath of office. to doug jonesnext as he was sworn in today, and walter mondale, a former arizona senator, stood next to tina smith. jones attracted national attention when he defeated conservative republican senatorial candidate roy moore in alabama. smith was lieutenant governor which you was appointed to replace al franken. he resigned after a series of sexual misconduct accusations. the death toll from the freezing temperatures across much of the united states has risen to 16, and it is not letting up with a bomb" gettingow ready to hit the east coast with snow and high wind.

this is the falls in sioux falls, south dakota, frozen solid. a weeks worth of protests in iran are prompting calls from the united eights to ask the united nations human rights council to hold an emergency session. officials said in a news briefing today there are existing sanctions the u.s. could use against human rights violators. they reported 21 people were killed and over 1000 others arrested during the protests. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton, this is bloomberg. julia? julia: coming up, we are flying high with expedia, our stop of the hour -- stock of the hour just upgraded bank of america. rating?behind the buy will tell you next. this is bloomberg. ou next. this is bloomberg.

julia: this is bloomberg markets, i'm julia chatterley. scarlet: i'm scarlet fu. thea: time for our stock of hour, expedia trading after being upgraded by bank of america to a buy. why now? >> they have upgraded it to a buy, and are saying there is a three-year opportunity. they are also talking about priceline, because they are reducing their exposure, that could help expedia. let's call this what it really is -- at least in my view. shares plunged in october, they put up a terrible quarter, and also guided to a really weak guidance performance -- take a look, 18% is really ugly. that guidance means we could be looking at a low bar quarter, thatnumbers are so low there are achievable might be beatable.

scarlet: you mentioned priceline. how does that fix in here -- fit in here? airbnb, and, a expedia. but there is more they can do. they have homeaway, trying to integrate those properties into their platform more, trying to keep the growth going. julia: and they have a relatively new ceo at the time as well? how is he tackling this in particular? >> he had a different standpoint than the last ceo. he was much more strategic. he was the cfo, so he is thinking about optimizing the cost. there is another reason to think that we are, perhaps, looking at what could be a very achievable quarter. but i was talking to our analysts here at bloomberg intelligence, and we were talking about the idea that if they do not eat and raise the stock -- julia: it feels kitchen sink-y.

>> that is a good way to put it. scarlet: what attracts investors to a stock like that? >> that is an interesting point, because he is to be a true growth investor. if we look at the evaluation, this function in the bloomberg, we see that shares across the board are trading at a discount, 25%,iscount on a pe basis, ev to rev, look at that, 60% discount. this is par for the course. in part, priceline has europe locked up with some deals, so expedia's margins are a lot less attractive. that could be a piece of the data, the evaluation thing. but this could also mean that we are looking at garp investors. they like the double-digit growth and they like the money as well. julia: looking at the bloomberg data, kind of enjoying a crowd here.

>> they could be setting up an interesting opportunity, and there is something possibly aneresting building there, island reversal, which means the stock could, if it achieves the old highs, could boomerang higher. time will tell, it is too soon to say. scarlet: thank you, abigail. let's move on to the broader markets. some investors have been hoarding cash, waiting for an opportunity to buy assets when t. to talk about this let's bring in steven wieting, chief global investment strategist for citi private bank. if people are holding a lot of cash, that tends to be a defensive sign. confidentnot feel about putting money into the markets. they would rather be holding on to something they know is tangible. you are saying right now, when they are holding cash, to be offensive, not defensive. steven: bear in mind that in

long-term portfolio holdings by hanging onto cash, you are chronically missing out on higher returns and other asset classes. that does not mean taking a wild amount of risk. it is simply investing across the yield curve. you have a much better opportunities in most holdings than you do in cash. it's a that reduces portfolio volatility a little over time. what you actually do over a lifetime of portfolio is reduce your return by over 50%. that is a concern. julia: that is quite shocking, that people are willing to sit on 30%. does that mean they are hoping for better entry points, or is there a degree of risk aversion? most of the conversations we a degree are including of complacency, whether it is valuations or even political risk as we head into 2018? steven: investors are putting more cash to work, but by and large, they have underinvested

since the crash in 2008, 2009. most portfolio holdings, even investment portfolios for private clients, are very, very high levels. they are coming down some, but they are getting to see this. what they find is that most investors who have a bearish point of view and hold a lot of cash on the sidelines and do not invest simply stay that way. they do not deploy the cash when markets have come down. in essence, you have to wait for the whole cycle to repeat again, and they never really invest. times are bad, prices are absurdly high, etc.. so by not putting money to work over prolonged periods of time, which is what happens, they are reducing their returns more than buying into a correction. that is a really important backdrop for what is going on right now. it might be one reason why this rally can continue. policy tighter monetary conditions not just in the u.s., but in europe as well.

do you think there will be less risk-taking as a result of that? steven: i think in the case of the u.s., we are going to see ist tighter monetary policy going to gradually weaken the momentum, the upward momentum we have had in asset prices. just coming to grips with the fact that earnings have grown at a double-digit pace, will grow at a double-digit pace, having investors really on the sidelines rather than fully invested is a great source of upward momentum in asset prices, but the u.s. equities have gone a long way, and tighter and tighter monetary policy. this could continue that direction year after year and is going to create some volatility. if you take a look at the global cases, i -- in many steal the time and here all the time that asset prices have moved up indiscriminately. take a look at emerging-market equities rise in dollars. they have had one quarter return of u.s. equities if you look at a five-year window of time. monetary policy is not

tightening, and qe never benefited these markets. in europe, you are looking at a situation where there is less easing before it is any tightening, and if you look at the differences between equity and bond valuations, you can see a dramatic valuation differences that still argue for equities. julia: so you are overweight on non-u.s. equities here, and also global disruptors. what do you mean by that? thatn: it is interesting the companies in the i.t. sector that have grown revenue at a remarkable rate, that they have done that over many years. why this market is unlike 1999, for example, is that you saw a tremendous, massive market cap persisting for companies losing money. instead, you can see companies that are falling, falling revenue, they are not in the index in a couple of years. you are, in fact, seeing, what looks like really absurd market caps, but they are displacing other sectors.

what has happened to ordinary department store retailers. last year, they fell back to a 2010 level while e-commerce giants were getting ever larger. there is a reason to all of this. let's talk about the dollar and how that ties into anything. we had a weaker dollar in 2017 that drove most money into emerging-market assets. was ready to raise rates three times this year, so that means a stronger dollar. does that take us back to where we were or will we muddle along? steven: in 2017, it proved that it does not have to mean a stronger dollar. we had five rate hikes in total so far. what happened over the prior six years that investors raced for outperformance on u.s. interest rates. they expected exceptional returns and policy divergence being extremely wide with the rest of the world. banks easingntral

dramatically -- it turned out there were increases in real interest rates that were much higher than in the united date, especially for an emerging markets. so emerging-market currencies were able to rally in the face of modest fed tightening. i think the markets every positions to the point where at least the median -- the annual view for 2018 is more bi-dir ectional in the u.s. dollar. -- thetill hanging on majority of its third-largest bull market in history, which ended in 2017. julia: stephen, great to chat with you. trump'sp, how president policies are impacting america's top colleges? we speak with the president of m.i.t. next. from new york, this is bloomberg.

♪ this is bloomberg markets. i'm scarlet fu. julia: and i'm julia chatterley.

higher education is under attack from restrictive u.s. immigration policies. rafael rife is an immigrant from venezuela who has emerged as a vocal critic of president trump in the past year, especially on the travel ban. he recently spoke exclusively to bloomberg about how the troubled and affects m.i.t.. -- travel ban affects m.i.t.. rafael: it is going to hurt, and when you hurt m.i.t., it hurts the country. help thean the college american economy? hasourse, the whole nation this perception that we are not as wealthy as we used to be. and the world is competitive, and there are opportunities elsewhere. the time i came, the option was unquestionably, if you want to be in the land of

opportunity, where they work and everyone is coming from all over the world, there is no question about that, whether it is m.i.t. or stanford. -- these institutions institutions were in america. but now that perception has changed, so yes, i have heard anecdotes along those lines as well. >> anecdotes of people who may come to m.i.t.? m.i.t., ine come to other times. and also anecdotes of having significant difficulty getting here. some people we are recruiting to start on september 1, their visa sort ofyed -- all anecdotes that i cannot quantify. this is something that was not there before. long-term, if these things we are talking about gain traction, how does that change the american technology workforce? decadees it look like a from now, two decades if this continues? rafael: this is serious stuff.

our nobley proud of laureates. look at where they were born. >> everywhere. rafael: everywhere, everywhere else not in the u.s.. we benefit from the fact that they came here and we are credited, america is credited, the u.s., for these nobel laureates. but they came from somewhere else to make their lives here. look at the technology meters and new companies, the startups. those leading our enterprises, many of them were not born in america. supply of talent in which we are fortunate to benefit because of the working culture of america -- if you stop that, that has a huge application on the future. particularly right now, it is a very competitive world.

we are competing with china for all sorts of things, including in the economy. china has five times the population of america. we need the best talent we can get to compete economically and in technology and science with china. and more of the world wants to come to america, that should be an asset. >> what companies would be hardest hit? are there larger ones that would really suffer? today: the issue we have is that we need talent in all of the new economy, not areas of the new economy. when we think of a new economy, we quickly think of companies like alphabet, google, and facebook, but every single companies that- have over 50% of the economy, with the to get on

digital economy. all of those companies, not just he digital companies, need digital know-how, and we are not producing enough of those here. one rationale for all of this, as you know, is that this gives american workers a better chance at these better jobs. so without the crackdown, won't american workers be displaced? is that a problem? rafael: there is clearly a problem with displacement of workers in a new economy. there is no question about that. functionis fraction -- function of the new economy, not that we have immigration or not. >> but if you cut off those workers from coming in, don't you solved the problem? rafael: we would have a problem anyway, because the problem is

retraining the workforce of today to working in a new economy. that is a problem that we have even if we have immigration crackdown. one does not fix the other. we have those two issues. but we will not be able to compete globally, compete with a worthy opponent, like canada or china, if we do not have the help and talent from all over the world. julia: that was our exclusive interview with m.i.t. president rafael rife. house press conference pushed back to 3:15 today. i am sure sarah huckabee sanders has a lot to say today on president trump's split from steve bannon. n.

julia: it is 12:00 p.m. in san francisco and 8:00 p.m. in london. i'm julia chatterley. scarlet: i'm scarlet fu. welcome to "bloomberg markets." ♪

scarlet: we are live and bloomberg world headquarters in new york over next hour. here at the top stories from around the world. president trump bashing his former chief strategist steve shannon. we will take you inside the presidents comments and when it means for politics inside the beltway and beyond. sarah sanders gets ready to speak seen. make thosehe comments. the dollar rallies for the first day in six. we focus on fx, as marc chandler -- with marc chandler. we have got u.s. markets closing in an hour's time. let's get a check on where things stand with julie hyman. two days of record highs. julie: very much like last year. as the major averages that more records. the nasdaq up record as of 1%.

we set a pattern. it is a today pattern for the major averages. today very much like yesterday. let's look at what groups are on the move. it is an interesting story. energy, which is the worst performing group of last year, is leading gains today. of in the gains even information technology. otherwise, a broad-based rally with many of the cyclical groups doing better. the more defensive groups that are on the back foot today, telecom, and utilities among them. that is where we are setting up. interesting individual stocks and groups on the move, include restaurants. there are a number of different industries that are poised to gain from the tax legislation that was passed late last year. some of the stocks have been -- benefited more than others. there is a catch up being played. restaurants is one of the areas where that is happening to we had a couple of analysts out saying restaurants in particular

will benefit from tax legislation. that they should get a benefit here and comp sales should rise at its -- should rise with restaurants as well. bj's was upgraded specifically. wasanalyst at -- said it improving visibility for comparable sales and earnings per share. some big gains there. there are some stock specific stories that are interesting. we have a deal within the utility industry. scan a, who shares desk whose have agreed to be acquired by dominion resources for 7.9 billion dollars. the deal is subject to approval by south carolina regulators. we will see if it does end up happening. values scan.e it even though it is up 23%, it is trading well below that offer price. the situation with

amd and intel. really fascinating story. after a report on a tech website, the register that a chip that is used to power the -- pc's has a vulnerability that allows hackers to access personal information. those shares are down 6%. this decline has been accelerating throughout the day. hasr rival in that business been behind intel is now gaining . thanks so much, julie. let's get a check on the headline on the bloomberg first word news. you. thank president trump is taking a tougher stance on protecting young undocumented in a dutch immigrants from deportation. that is hanging over talks to prevent a government shutdown. the white house says any deal on the so-called dreamers may -- must prohibit immigrants from sponsoring family members to

join them. say anties in ireland 18-year-old egyptian nationalism is in custody in connection with the stabbing death of a japanese man and the stabbings of two other people. the attacks occurred in -- occurred south of the border with northern ireland. the terror attack is in line of inquiry. we are endeavoring to check the suspects background. and why they are here. those are important questions. ask and answer. as to why the attacks -- the suspect believe had been seeking a sigh limit the republic of ireland in recent days. said the suspect had been in contact with police two days earlier when questions were asked about his immigration status. demonstrators with iranian flags rather in brussels to show their

support for ongoing protests in iran which have left 20 people dead and more than a thousand others arrested. the demonstrators met in front of the european council and european commission buildings and called on the european union and the international community to put pressure on the iranian regime. >> the eu is closely funneling demonstrations in the country, and the honest -- been a rights has issue and our relationship with i run. peaceful demonstration and freedom of expression are fundamental rights that apply to every country. mark: meantime, i runs guard today declared a and to what it calls the sedition. global news, 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. julia: thanks so much, market we have breaking his former trump

campaign chairman, paul manafort, has filed a lawsuit against robert mueller. deputy attorney general rod rosenstein and the justice department in federal court in washington. mueller overstepped his legal authority. let's get more with a bloomberg's alex wayne in our d.c. bureau. ofreal sent -- a sentiment what the claims are for pot -- from paul manafort. can you give us any sense of this? >> having not read the complaint yet, what i am guessing is that he is suing the justice department, claiming the special counsel robert mueller has overstepped his mandate. pickingwas charged with up the fbi investigation into the russian interference in the 2016 campaign. what man of fort is charged with is money laundering and conspiracy based on activities he began before he was part of trump's campaign. stuff thaty much

robert mueller discovered as he was investigating paul manafort's campaign activity. manafort isg paul adopting what sounds like a novel, legal strategy of trying thatt a judge to declare robert mueller should not have been looking into paul manafort's business and financial behavior. scarlet: so it had nothing to do with what he did for the trump campaign? it has been a great day for the president's former campaign managers because steve bannon was thrown under the bus to the president in this statement that the president made. an official white house statement. alex: not a tweet. little bit more about what led to this break. up until recently, our understanding was the president and the steve bannon were still fairly close in communicate -- and communicated fairly often. couple steps a back, steve bannon left the

white house in august. since then, he has enjoyed some access to the president. at a conference in hong kong in september, he bragged at a private breakfast that he still talks to the president by phone two or three times a week. steve bannon backed roy moore in the alabama special election over trump's protestations. trump wanted luther strange to win the primary. roy moore lost to doug jones. that tarnished bannon's reputation as a strategist. definitely tarnished his reputation in the white house. noticed by as not lot of people, but right after the tax bill was passed, trump issued a tweet, complementing mitch mcconnell for his strategy and getting that legislation over the finish line. that could have been interpreted as a smack at steve bannon who was -- who has targeted mitch mcconnell for removal. today, excerpts of a new book i author michael wolff have been

-- by author michael wolff have been published. it is a bombshell book. it is full of eye-opening revelations about the trump campaign and the first month's of the white house. steve bannon is quoted, criticizing both the president and his family, namely his son, don junior who has responded at some length on twitter today. has been doing a lot of talking, not just for this book, but he has spoken with vanities -- vanity fair, where he might run for president. how much of the republican party is with steve bannon versus with the president? is steve bannon part of the republican party? alex: those are great questions. i wish i had a number for you. i don't think we really know. we know his website, breitbart news, is very popular among a certain strain of republican such as nationalists -- the nationalists.

steve bannon himself is very unpopular among many senate republicans. the mitch mcconnell of the party. the 2018 elections are going to be a good test of who has got more juice, mitch mcconnell or steve bannon? in a lot of cases, you will see steve bannon and donald trump overlap in those elections. i think they will find it themselves backing the primaries. -- they will find themselves backing the same candidates in the primaries. and backing candidates and replicable -- republican primaries who vowed to vote against mitch mcconnell. we will have an answer to that question by november 2018. julia: to what extent is this apparent split tibet has burst , this washe open something far more formal. to what extent do you think that

dictates the president's behavior going forward, and as you pointed out, this nationalist line we have seen taken at times that has been attributed to the influence of steve bannon? what extent do you think the president will want to disassociate himself? alex: we are going to find out this month. immigration is really coming to a boil. do somethinge to about these dreamers. the young immigrants brought to the country by their parents now faceted, who deportation, beginning as soon as march unless congress passes some sort of law protecting them. donald trump has said he would like to get some protections in place for them. he also has made significant demands of his own, money for his wall, and end to certain policies that democrats will find hard to swallow. now that he is broken with bannon who was staunchly

anti-immigrant, it will be interesting to see whether trump is more willing to make a deal on daca, the program for these immigrants, that is favorable to the democratic demands. julia: that is such a great point. when we didn't see that program guise of under the steve bannon, p are to lay into the president. scarlet: bloomberg's alex wayne, stick with us because we are awaiting sarah sanders to take the stand to take -- tuesday at the white house. what will the press secretary say about the president's response, his comments on steve bannon, his official statement? julia: how about policy? scarlet: we will bring that to you as soon as it begins. this is bloomberg. ♪ ♪

♪ this is "bloomberg markets." scarlet: i'm scarlet fu. it is time for the bloomberg business flash. is trimming its losses on the day and a rival advanced micro devices paring its gains after intel officially refuted the reports of a design flaw. recent reportss, that these exploits are caused by a bug or flock and are unique are unique or flaw to intel products. have thehey do not potential to corrupt or modify data. a former executive group is in legal trouble once again. 46 euros michael kelly and, the onetime head of european operations for the firm, was charged with fraud related to the hedge fund investments in africa. year allegingt

that he oversaw a bribery scheme that. rare form of a blindness will come at a high price. the new drug from spark therapeutics will cause -- cost $850,000 for both eyes. it was approved last month by the fda last month. that is your business flash update. julia: let's get back to the showdown between the president and steve bannon. we joined by editor megan murphy. where do we go with this? the third of january. >> i thought it was the fourth. we are going to wait to see what more comes out of the white house. and what comes out in the tweets, what comes out in the statements. the president has put back a very forceful statement, rejecting these planes coming excerptseve bannon's

on this book. none of us have read it. this is explosive stuff. there are a couple of trouble point issues. one is on the russia investigation. and how steve bannon, the president's former close as architect of his populist campaign, what he says about that meeting in it being unpatriotic, character acting -- characterizing them as idiots as taking that meeting and not former -- forming -- informing the fbi that they were taking it. that is interesting in and of itself and how much that he wills the flames of that investigation. separately, there is a lot of detail that is emerging about how his closest advisor fell about the merits of the campaign. damaging stuff coming out in terms of how a ivanka trump characterize the campaign. in tears, not in

tears of joy, on the night of the election. the book is coming out. it is number one on amazon. it is going to be something people will be talking about. the main political question is, where is the space going to be aligned? will steve bannon continue to displace thisto populist republican movement, versus one thing the president hates, is when you say to him that he did not win that election on his own merit. nothing makes him angrier than when you call him stupid. scarlet: where does the base go, who doesn't stick with? does ago with bannon, or stick with president trump? alex, let me turn to you. oh, we don't have alex. nevermind. my question is as we wait for official washington to respond to this, but you spoke with the

congressman of texas and asked him for his thoughts. he was not able to give you one. julia: he made a distinction between what is a formalized statement in a tweet. i asked him what he meant by that given the rest of us are confused. scarlet: i wonder if it is because they are waiting to wait for the base to react. megan: i think it is important we put this into contact -- context. we really have a few key data points. we have the alabama special election for senate where the candidate that was backed by steve an end and roy moore and by the president lost comprehensively to doug jones. the first democratic senator in a genuine -- in a generation. the question is, was the base already trying to move away from donald trump? if we also look at virginia and how that played out in a much better swing toward the democrats then a lot of people

expected in certain areas of virginia, even urban areas, that is going to be interesting in terms of white women and whether or not quite women are turning away from their rhetoric of the steve shannon, from the rhetoric of the president, when they look allegations against roy moore. they look at the behavior and tweets that the president does. do they like how this country is being governed? much as anow if it is question of this rivalry between steve bannon and donald trump, full rhetoric as a person who runs this country out of the twitter account is playing out more broadly. julia: i think the republicans can push back on the alabama thing. and you can't make the shifting -- given the candidate was questionable in these circumstances. i guess my question here would be, do you think in putting out this statement, they have overplayed their hand? now, it is a best seller on amazon. now, it has attention. ifan: it is not too smart

you want to bury a book and not draw attention to it by giving its -- by giving this attention. the white house will be filled with challenging questions. first, sarah sanders in terms of how she will respond. one thing we have to be cautious as recently as last night, we will work -- we were worked up into a lather between whose nuclear button was bigger. fuel, anotherr part of the 24 hour news cycle. any people think they do this on purpose to distract from the real issues that people want to be talking about. think, willeople donald trump be super angry about steve bannon, calling his own son an idiot? able to go out there and challenge the statement. it was pulling no punches state -- saying steve bannon had a minimal role in his victory.

we all know that is not true. the president eventually got all that. it is very important in terms of looking at populism. we spend so much time talking about that and how much it is holding sway. whether or not people want to take a step back from that policy. scarlet: megan is going to stick with us as we await sarah sanders to take the stand there. to questions,nd i'm sure come on the battle between steve bannon and donald trump. we will bring it to you live at soon as it begins. julia: from new york, this is bloomberg. ♪

sec. sanders: this statement was pretty clear. there is not much to clarify or to add. they did have a long and close working relationship. sec. sanders: i think the president's statement fully

addresses what his position and what his relationship with mr. bannon is. when was the last time the president talked to steve bannon? is the president now blocking steve bannon? reporter: i am not aware --sec. sanders: i am not aware he was calling his cell phone. i believe the last conversation took place at the first part of december. reporter: [indiscernible] sec. sanders: i don't think it does anything to the president's base. the base and the people who supported this president supported the president and his agenda. those things have not changed. the president is exactly who he was yesterday as he was two years ago when he started out on the campaign trail. as agenda has not changed. he is continuing to fight for and push for that agenda. i think the base is extremely excited and happy with the job this president has done and his first year in office, look at all he is accomplished, he is

hot -- they are happy with where he is. reporter: steve bannon has been following -- some people who may not necessarily be for the other, people. what happens there? sec. sanders: i think that is a question you will have to ask steve bannon. the presidents they says not changed because a president has not changed. we are continuing to accomplish a lot of this -- a lot of the things that were on the president's agenda like last year. we will do more this year as we move into the beginning of 2018. did the president's son commit treason? sec. sanders: i think that is a ridiculous accusation and one i am sure we have addressed many times. if that is in reference to comments made by mr. bannon, i refer you to the ones he made on 60 minutes where he called the collusion with russia about this

president a total farce. i think i would look back at that. if anyone has been inconsistent, it has not been the president or this administration. reporter: did the president meet any of those people? sec. sanders: the president was not aware of that. the tweet about nuclear buttons, are americans concerned about the president's mental fitness, that he seems to be speaking lately about nuclear buttons? sec. sanders: i think the president and the people of this country should be concerned about the mental fitness of the leader of north korea. he has made repeated threats. he has tested missiles time and time again for years. this is a president who is not going to cap were down and not going to be week and will make sure he does what he has promised to do. that is stand up and protecting the american people. isn't it possible he

could misinterpret that? i did not say that. i think it is extremely clear what the president's position is. our position on north korea has not changed since the beginning. this is a president who is committed to protecting americans. and protecting the people of this country. he won up back down. a very harsh statement the president has put down. it is not the first time steve bannon has [indiscernible] on 60 minutes. during that white house press briefing on september 11th, and when a series of questions were asked, you were hands off in terms of going after steve bannon. -- whatident originally has changed? what has changed between then and now after steve interviewed? once again, i

think the president and his feelings toward mr. bannon are very clear in his statement. else to really not much add beyond that. i don't think there is much gray area in what their friendship is. reporter: this is a pretty dramatic falling out between the president and someone who worked on his campaign, and also worked in his white house close to them every day. wondering,ryone is what to lead to this dramatic falling out, and what did the loss of roy moore in that senate race, you mention they had last talked in december, this is a direct response to steve bannon calling the president unpatriotic. saying he committed treatment. -- treason. sec. sanders: i think going after the president's son is an way to curry favor. reporter: the president was

harsh and that the entire book is fiction. that said, a note explaining about [indiscernible] the president spoke to over 200 people, -- sec. sanders: he never set down with the president, to be clear. conversation brief that had nothing to do originally with the book. five to seven minutes in total. that is the only interaction he has had. reporter: [indiscernible] sec. sanders: that is the only interaction the president has had with michael wolff since he took office. reporter: the president's statement with the author statement without the book [indiscernible] sec. sanders: i am not sure what the authors statement is with what the booking to be. i know the book has a lot of things, so far, that are completely untrue. people are coming